The non-binding recommendation has nothing to do with escalating conflict between Israel and Palestinian militants in the Gaza Strip, the Belgian Economics Ministry said, noting that Britain and Denmark already had similar labelling in place.

"It's a non-binding advice to state on labels that products originating from occupied territories come from there," a ministry spokeswoman said. "We don't see this as a sanction against Israel, but EU rules stipulate that consumers have to be informed of the origins of products."

The ministry planned to send a letter to retail federations on Tuesday recommending the use of such labels. Belgian retail federation Comeos and the Israeli Embassy in Brussels said they would not comment before the letter was issued.

Israel has been critical of any move to label produce from Jewish settlements clearly or distinguish them from goods produced by Palestinians, arguing that the distinction is part of a larger effort to impose a Palestinian state on Israel.

The labels Belgium has in mind would mainly apply to fruit and vegetables grown in Jewish settlements in the Jordan Valley of the West Bank. But they could include products such as sparkling water made by SodaStream and cosmetics by Ahava which both have production facilities in the West Bank.

Palestinians have limited self-rule in areas of the West Bank not taken up by Israeli settlements.

Palestinians want to establish a state in the West Bank and Gaza with East Jerusalem as their capital, but the latest round of U.S.-brokered peace talks collapsed in April. Palestinians fear the settlements, which the European Union views as illegal and an obstacle to peace, will deny them a viable country.

Israel took the West Bank, Gaza and East Jerusalem in a 1967 war. It later annexed East Jerusalem in a move not recognized internationally. More than 500,000 Jews now live in settlements in the West Bank and East Jerusalem alongside some 3 million Palestinians. Israel withdrew from the tiny Gaza Strip in 2005.